Sara Lee to spin off Hanesbrands this summer

Move tightens parent's focus; new firm's 9-month profit rose 16%

By

RobertDaniel

DanBurrows

NEW YORK (MarketWatch) -- Sara Lee Corp., moving forward with plans to offload its branded-apparel Americas/Asia business, said Wednesday it'll spin off the operation to its shareholders as a separate, publicly traded company this summer.

The move, announced last year, is part of efforts by Chicago-based Sara Lee
SLE, -0.38%
to focus on foods, beverages, and household and personal-care products.

How much of the business, called Hanesbrands Inc., each holder will receive will be determined shortly before the spin-off goes through, the company said.

Hanesbrands, which had fiscal 2005 sales of $4.7 billion, will trade on the New York Stock Exchange under the symbol HBI.

Hanesbrands has a prominent portfolio of apparel names, including Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra. Sara Lee said the brands hold either the No. 1 or No. 2 U.S. market position by sales in most categories in which they compete.

For the 39 weeks ended April 1, the unit's net income advanced 16% to $263.2 million as sales fell 5% to $3.35 billion.

A Securities and Exchange Commission filing shows that sales declined mainly as the company discontinued product lines with thinner profit margins in the innerwear, outerwear and international segments, and shipped less sheer hosiery. Other factors in the sales decline were lower selling prices and changes in product mix.

"The spin-off represents the last major piece of Sara Lee's third pillar of its transformation plan," said Gimme Credit analyst Craig Hutson in a note to clients. "We believe that the asset sale proceeds from these remaining non-core operations combined with proceeds from deals announced but not yet closed will allow Sara Lee to achieve its $3 billion net proceeds target."

The company expects to close the spin-off between June and September, subject to market conditions, regulatory clearances and other conditions. It's seeking a ruling from the Internal Revenue Service that the deal will be tax-free to shareholders.

"With the spin-off of Hanesbrands, we will be significantly closer to becoming a single, integrated operating company focused on delivering high-quality, innovative food, beverage, and household and body care products to consumers around the world," said Brenda Barnes, chairman and chief executive, in a news release.

Sara Lee is in the process of shedding non-core assets to focus on its core brands in its packaged-food, beverages, and household and body-care businesses. In its most recent move, in early May the company said it's essentially giving away its Courtaulds apparel business to a group led by PD Enterprises Ltd.

Sara Lee will receive no proceeds from the transaction and will retain pension liability. The U.K.-based Courtaulds, which makes private-label clothing for retailers, had fiscal 2005 sales of nearly $560 million, the company said.

In other recent developments, Sara Lee entered into exclusive negotiations with Smithfield Foods Inc.
SFD, -6.78%
over the prospective sale of its European meats business; and in early February the company closed the sale of its European branded-apparel business to an affiliate of Sun Capital Partners Inc. for about 100 million euros in cash. Late last year, it sold a European nuts and snacks unit to PepsiCo Inc.
PEP, +0.56%
for $152 million.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.